One of the main problems with the modern real business cycle (RBC) literature is its inability to replicate the empirical behavior of the main asset returns in the data. Several authors have incorporated financial markets into the basic model showing that, regardless of the parameterization or the incorporation of other frictions, like capital adjustment costs, these models are unable to replicate the key financial statistics in the data, predicting an equity premium which is essentially zero, and asset return volatilities that are also far from reality. One of the main reasons for the lack of success of the previous models may be the fact that they are using a representative agent environment. In this case, financial markets are effectively complete, independently of the existing asset structure. In the present thesis, this assumption is relaxed by incorporating both, idiosyncratic labor income risk and imperfect risk sharing, leading to ex-post household heterogeneity and to an incomplete financial market structure. One of the main objectives is therefore to see, if these extensions can help to improve the asset pricing implications of the standard model. We have to mention that, since the original statement of the asset pricing puzzles by Mehra and Prescott (85), there has been a large strand of literature trying to analyze the asset pricing implications of a context with household heterogeneity and incomplete financial markets. Among others, Aiyagari and Gertler (91), Heaton and Lucas (96), Lucas (94), Marcet and Singleton (99), and Telmer (93) have studied such a framework under the assumption of exogenously determined asset returns and consumption processes. Note, however, that our analysis goes one step further in the sense that it incorporates a production technology, offering a better foundation of asset prices than the standard exchange economy. In particular, consumption is derived from explicit utility maximization instead of being specified exogenously. In addition, the value of price of equity is determined endogenously via the optimization problem of the firm, which also breaks the identity between dividends and consumption processes in exchange economies. We indeed believe, that a detailed and rigorous analysis of asset pricing requires a general equilibrium model of this type. Note also that the presence of a non-trivial production sector involves addressing an important issue, which has not been given very much attention in the previous asset pricing literature. Under incomplete financial markets and household (shareholder) heterogeneity, the usual profit maximization of the firm is no longer well defined. Thus, unless one assumes that the firm is myopic, in the sense that it solves a static optimization problem by maximizing period by period profits, one has to incorporate non-standard firm objectives into the model. A second important objective or contribution of the present thesis is therefore to illustrate how to get around the problem of the firm by incorporating a firm objective which is adequate for the case in which financial markets are incomplete.